During the last half-century transaction cost became a prominent consideration in discussions about externalities and ownership arrangements. The author of this essay contributed to this development in the earlier part of this half-century but has since come to doubt the importance of transaction cost and even the roles it is thought to play in these two areas of economic thought. A succinct statement of this doubt as it pertains to the externality problem is a primary task of this essay. The last part of the essay questions the dominant position given to transaction cost in discussions of ownership forms that now go by the names of commons, anti-commons, and gridlocks.

The Information Economy Project is proud to present articles that have been published in the Arizona Law Review, Volume 53, from the Tragedies of the Gridlock Economy: How Mis-Configuring Property Rights Stymies Social Efficiency held on October 2, 2009:Symposium — Tragedies of the Gridlock Economy: How Mis-Configuring Property Rights Stymies Social Efficiency*

“Heller’s Gridlock Economy In Perspective” by Richard A. Epstein, 53 Ariz. L. Rev. 51 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “The topic of this conference is Michael Heller’s provocative new book on The Gridlock Economy.1 The central thesis of the book is that one critical obstacle to overall social advancement is the fragmentation of property among private owners that prevents its coherent assembly for projects that are desired by all but achievable by none. There is no question that, more than anyone else, Heller has put this topic on the map in its current form, chiefly through two earlier academic articles which have had immense influence on the field.2 The ability to introduce into the mature field of law and economics even a single new generative term, the anticommons on which Gridlock is based, is a major intellectual achievement…”

“Exclusion and Exclusivity in Gridlock,” by Eric R. Claeys, 53 Ariz. L. Rev. 9 (2011). “Michael Heller earned respect among property scholars in his 1998 article The Tragedy of the Anticommons: Property in the Transition from Marx to Markets. The conception of a “tragedy of the commons” had been popularized by Garrett Hardin in a 1968 article by that name. When ranchers have open access (a commons) to grass, their cattle tend to overeat it (the tragedy). Harold Demsetz provided the canonical economic response to tragedies of the commons: private property. Exclusive rights of control, use, and disposition (“exclusive possessory rights”) encourage owners to internalize externalities associated with the over-consumption of resources held in common…”

Spectrum Policy:

“Tragedy T.V.: Rights Fragmentation and the Junk Band Problem” by Thomas W. Hazlett, 53 Ariz. L. Rev. 83 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “Tragedy of the anti-commons occurs when property rules fail to enable efficient social coordination. In radio spectrum, rights issued to airwave users have traditionally been severely truncated, leaving gains from trade unexploited. The social losses that Ronald Coase (1959) asserted, appealing to basic theories of resource allocation, are now revealed via intense under-utilization of the TV Band…”

“The Wasteland: Anticommons, White Spaces, and the Fallacy of Spectrum” by Kevin Werbach, 53 Ariz. L. Rev. 213 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “I urge you, I urge you to put the people’s airwaves to the service of the people and the cause of freedom. You must help prepare a generation for great decisions. You must help a great nation fulfill its future. Do this! I pledge you our help.”1 Federal Communications Commission (FCC) Chairman Newton Minow’s 1961 address to the National Association of Broadcasters is legendary for its caustic dismissal of television as a “vast wasteland.”2 Yet Minow intended to emphasize a different two-word phrase: “public interest.”3 Television was the most prominent use of “the people’s airwaves” — the government-defined capacity for wireless communication — and it was failing to serve national interests.4…

Google Book Search:

“Google Book Search in the Gridlock Economy” by Doug Lichtman, 53 Ariz. L. Rev. 131 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “Michael Heller’s Gridlock Economy popularizes a concept that Heller has developed over nearly two decades of influential academic writing: the notion that, when it comes to property rights, too many rights-endowed cooks really can spoil the broth. I was asked in this conference to apply Heller’s insight to the Google Book Search project, and the request at first seemed natural. Heller himself has suggested that Google Book Search might be an apt poster child for the gridlock phenomenon; and Google likewise can often be heard to complain, in Heller-esque tones, that the only way to build a comprehensive search engine for books is to take the books without asking….”

“Autonomy and Independence: The Normative Face of Transaction Costs” by Robert P. Merges, 53 Ariz. L. Rev. 145 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “Anticommons theory made a splash, and is today being expanded and applied, because it shifted our collective attention in a crucial way. Before the 1990s, the big policy questions in IP were all about individual IP rights: when should a copyright or patent be granted, when denied? Anticommons theory burst into this conventional conversation like an unruly drunk at a ballet recital. It demanded attention. It said, in effect, “you may mean well, but you’re missing the big point. You’re wasting your time!” The big point is not the individual grant of an IP right. It’s the aggregate impact of granting many rights to many discrete and independent right-holders…”

Luncheon Keynote:

“On Being Misled by Transaction Cost Economics: Externalities, Commons, and Gridlocks” by Harold Demsetz, 53 Ariz. L. Rev. 1 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “During the last half-century transaction cost became a prominent consideration in discussions about externalities and ownership arrangements. The author of this essay contributed to this development in the earlier part of this half-century but has since come to doubt the importance of transaction cost and even the roles it is thought to play in these two areas of economic thought. A succinct statement of this doubt as it pertains to the externality problem is a primary task of this essay. The last part of the essay questions the dominant position given to transaction cost in discussions of ownership forms that now go by the names of commons, anti-commons, and gridlocks…”

Patent Reform:

“The Rise and Fall of the First Patent Thicket: The Sewing Machine War of the 1850s” by Adam Mossoff, 53 Ariz. L. Rev. 165 (2011), March 2010. “After Professor Michael Heller proposed that excessively fragmented property rights in land can frustrate its commercial development, patent scholars have debated vigorously whether Heller’s anticommons theory applies to property rights in inventions. Do these “patent thickets” exist, and if so, what are the best solutions? This article contributes to this debate by analyzing the rise and fall of the first American patent thicket: the “Sewing Machine War” of the 1850s…”

Coase Conference: Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase, University of Chicago Law School. Harold Demsetz, Professor Emeritus, UCLA Department of Economics.

It is clear from articles I have written for the New Palgrave Dictionary of Law and Economics and other publications that I have high regard for Coase and his works. Some would say I have published parts of his works more times than has he. True or not, my role in explaining, defending, and extending Ronald’s writings has left me with little to say that is different from what I have already written, so my theme today is not a product of conscious deliberation. Instead it came to me in a dream during which I wrestled with the problem of what I might say today. Into this dream strode George Stigler, who immediately began to berate me for having left this great university for UCLA in 1971. He aimed repeated barrages of vocal darts at me, but, after evading my defenses a few times, he settled down, behaved more civilly, and quietly said “I see you are returning to Chicago to cozy up to Ronald. Hasn’t he spent all that Nobel award money yet?” I told him I had no need for funding, whereupon he observed that no good economist would ever make such a claim. Then he went on to make a request. “Will you do me a favor for old time’s sake? When you speak at the conference I want you to defend my neoclassical buddies from Ronald’s complaints about their work. The work is better than Ronald thinks. I know whereof I speak. Ronald, you know, has certified me as a top notch historian of economic thought.” I said no to his request. A celebration hardly seems the time for critical evaluation. George frowned, and he asserted that I had forgotten advice he once gave me. He repeated the advice. “The most meaningful way to honor a scholar is to take his or her work seriously.”